FAFSA Application & Joint Savings Acct with Fiance?

Question

I've got a joint savings account with my fiance where I've been making consistent deposits. She's listed on the account with me, and she'll be attending grad school in the fall. What impact will the joint account (and it's underlying assets) have on her FAFSA application? She'll be filing the FAFSA as a single, independent, as we'll be married after the FAFSA is due and after her schooling has begun.

As my income is substantially higher than hers, we're trying to qualify for the maximum amount of aid in year 1 to help offset no expected aid in years 2-4. What can we do to receive the most favorable award while still doing things on the up and up?

Some additional details:

We will not be married at the time the FAFSA is filed and not be married when she begins school in the fall. Next year's FAFSA will be submitted based on us as a married couple.

I do not support her at all, pay her bills, etc. The joint account was just a way for us to pool our money that we were saving for a house/apartment.

Currently the saving acct has about $20k in it, with all of it being my money. The interest accrued as of the end of 2006 was only a few dollars, and was so small that the bank did not even issue a 1099 for it (acct was opened very late in 2006).

So from a tax standpoint, there's really nothing that can be traced using 2006 tax docs. 2007 will be a different story.

What seems to be the best play here? Transfer the money out? Drop her from the acct? Or just disclose the balance?

She filed a 1040 in 2006 and her AGI was around $15k. Would the $20k in savings fall under the Asset Protection Allowance in the FAFSA?

Answer 1

Unfortunately, because the account is in her name, too, she HAS to report it in the section that asks for income/assets/savings. Depending on the size of the account, it is possible that the money will have an affect on her eligibility for Financial Aid. In general, about 35% of the money in that savings/investment account(s) will be earmarked for her EFC.

Your only options here are (a) to remove your fiancee's name from the account or (b) have her write a letter to her school explaining that, although the money is partly in her name, it's really not available to her.

Both of these options are a little dishonest: the FAFSA is designed to determine how much money a student COULD use to pay for college rather than how much money she WANTS to use. The money in that savings account *is* a resource that she could be using to fund her education.

Ultimately, as a graduate student, your fiance won't be eligible for any federal grant funding anyway. You can try to find out if her future school(s) offer any scholarship funding and what the criteria for that funding might be. If the only money out there is federal loans and merit-based awards, it might not be worth putting yourself at risk by trying to lower your EFC. There's always the chance that her school will request copies of tax returns (etc.) and, if that savings account (or the interest it earns) is listed anywhere on that documentation, you might be caught in a lie.

Answer 2

It depends on several things, will you be married to her or not at the time she files the FAFSA? If so the joint assets are reported regardless of who provides the major contribution to the account. How much is in the account? The Asset Protection Allowance in the FAFSA formula protects the first $40,000 of net assets from consideration. Is it possible for you to move her portion of the assets into her own accounts, with each of you as the sole person on the appropriate ones rather than joint accounts? While it may mean a difference in how you manage your finances personally, she has to report joint accounts and their totals. While the school may, under professional judgment, use only her contribution to the assets, she'd have to prove what is her portion and what is yours, which is easier said than done, especially if she has full access to the money in the accounts.

BTW, if you are paying bills for things that are in her name, she has to report the total amount for the year that you have paid for her with your money on FAFSA Worksheet B.

Answer 3

I would say you need to remove her from your checking account for now, if her SSN is on your account. It makes it traceable and if hers is one of the random applications selected for verification it might mess things up. I was single and on FAFSA, when I got married it did not change my status as they only do YEARLY renewals, even though I now had a second income I did not need to report any changes until I applied the following year. She might be lucky and have a finical aid department that is helpful as I did. If you support her, then she would have no income and should qualify for a larger award. She might need to write a statement on her application that she is supported by her boyfriend. Have her talk to her finical aid department for clarification. You don't want to lie about anything that can be traced with her SSN.

Good luck with Grad school and Good luck and Best Whishes on the wedding.

Answer 4

oh my! you have a variety of answers here! but yes, under joint ownership each ssn is insured up to 100k whether it is in one, five or ten accts. FDIC insurance are divided in 3 major categories, single ownership accts, joint accts and trust (informal and formal) accts. the FDIC website as conveniently put in a couple of the answers provides this 20+page explanation in simple language (whoohoo) that will help you understand this a lot better. Its worth the read.

Answer 5

Just for some additional information to FinancialAidGirl is maybe see if she qualifies for a graduate or research assistant position with the college. It sometimes comes without benefits depending on the school. However, it can help pay for the remaining years of graduate school and its costs.

Answer 6

i'm not a fafsa expert